Computerised trading systems which match bids and offers, orders, or other specified requests of parties, in order to make a trade, are widely disclosed in the prior art. Some systems provide a user with information about existing bids and offers and enable the user to make a trade, while other systems automatically form a trade from a bid and offer when they are found to match. However, to provide an anonymous market in which counterparties are unaware of each other's identities until a trade has been completed, client terminals are generally provided with a less than complete view of the bids and offers available. In particular, the identity of the party making a bid or offer is often not displayed at a client terminal.
Financial institutions generally wish to impose limits on the degree to which they and their representatives trade with other institutions, to control the risk associated with the trades. This risk may be associated with likelihood of a counterparty defaulting on a trade before settlement. In markets for contract instruments, such as interest rate derivatives which establish an ongoing contract between parties relating to interest rate movements for many months or years in the future, the control of exposure to a counterparty ceasing to exist or defaulting on a contract for other reasons can become of paramount importance.
The control of credit risk exposure is difficult to implement in a fully anonymous market. In traditional voice broking markets a compromise is often reached by agreeing trades anonymously on a provisional basis, subject to a subsequent credit check. For example, it may be desirable for a central server to maintain details of gross counterparty credit limits which cover each possible combination of parties. These limits can usually be defined by individual parties.
There are a number of deficiencies in the related prior art which the invention seeks to address.
In particular it is an object of the invention to provide an improved electronic trading system in which potential trades are matched on the basis of mutual credit between the parties as well as other parameters such as price and quantity parameters.
Another object of the invention is to provide an electronic trading system in which the credit control of trades is convenient to administer, and minimises the degree to which potential trades are unduly blocked on grounds of credit.
Another object of the invention is to provide an electronic trading system in which the participants such as traders, trader desks and trading institutions, and the associated aspects of the credit system are able to interoperate in a flexible and convenient manner.
Another object of the invention is to provide improved methods of controlling the extent to which credit is allocated to different maturities or other time banded aspects of traded instruments, and to provide consistent and beneficial schemes for adjusting and moving allocated credit between different time bands.
It is also an object of the invention to provide more flexible and appropriate methods for association of risk and credit between different tradeable instruments, and to provide users of the system with improved control over such methods.
It is also an object of the invention to provide an electronic trading system in which an anonymous market is maintained through improvements in the way tradeable instruments and market information are displayed according to the degree to which associated trades may be limited by the credit system.
It is also an object of the invention to provide a system in which the amount of credit needed for a given set of orders to be matched is reduced or minimised.